Minister for Finance Michael Noonan is to present revised economic estimates to the Cabinet on Tuesday, with GDP growth now expected to run at 4.3 per cent this year, up from an earlier forecast of 3.5 per cent. For 2018, the Department of Finance is expecting continued healthy growth of 3.7 per cent. The anticipated hit to growth after the Brexit referendum has simply not appeared. The Irish economy continues to steam ahead, even if the final Brexit reckoning, the Trump policies on trade and the economic risks of Marine Le Pen being elected as French president present an unusually toxic trio of risks.
The presentation of the figures is part of the preparation for the official updated economic forecasts to be presented to Brussels as part of the budget process. A draft will be published this week but the numbers will not be finalised until late spring or early summer. It remains to be seen what the department will say about the likely room for manoeuvre to hike spending and cut taxes in the budget, previously estimated at €1.2 billion. Mr Noonan said on Monday that work was being finalised on the exact figure.
Pressure on spending
Whatever the final estimate, the scope for budget concessions will be limited. Inevitably pressure on spending are building, with the Government under pressure in particular for more concessions on public sector pay. There are also demands to increase investment spending significantly.
In the current political environment, scope to resist these demands is limited and the ability to raise extra revenue to pay for any concessions is pretty much non-existent. Added to this is the uncertainty about when Taoiseach Enda Kenny will stand aside, who his replacement will be and whether the whole thing could yet trigger a general election.
In short, no serious work on budgetary options is likely for the foreseeable future, with the normal work of government effectively stalled. Part of the rationale for the new approach to the budget was to give more time to plan and discuss the options at Oireachtas committees and more widely. Instead, we could drift into summer with little real work done, leaving the usual fuss to take place when normal business resumes after the summer break. Sometimes the more things change, the more they stay the same.
